Experts Agree: New SBA Regulations are Bad for Small Business

Legal Expert Confirms Billions in Small Business Contracts will be Awarded to Large Corporations through 2012

December 11, 2006

Petaluma, CA – December 11, 2006/ New regulations put forth by the Small Business Administration (SBA) are undergoing scrutiny from Capitol Hill and legal experts. Noted federal contracting expert Professor Charles Tiefer of the University of Baltimore School of Law issued an opinion on the loophole in new SBA size standard regulations. After a review of the regulations and related documentation, Tiefer concluded, "SBA's latest size standard regulations issued in mid-November will still result in the federal government reporting many of its prime contracts performed by large businesses as small business contract awards for at least five years to come." (See www.asbl.com/documents/TieferOpinion.doc.)

Professor Tiefer is former associate editor of the Harvard Law Review and currently serves as consultant to the House of Representatives on government contracts matters. Tiefer's opinion echoes statements made previously by leading lawmakers as well as the SBA's own inspector general and presents a stark contrast to the rationale the SBA has presented for adopting the rule.

Senator John Kerry (D-MA), incoming chair of the Senate Committee on Small Business & Entrepreneurship, called the SBA's new policy inadequate. "If there's a way to guarantee no abuse, that's our concern," Kerry told Inc.com. "I know five years is too broad for that."

Nydia Velázquez (D-NY), incoming chair of the House Small Business Committee, concurred with Kerry's assessment. "The agency's rule fails to address the vast majority of this problem," Velázquez stated in the New York Times.

The new regulations also ignore the recommendations made by the SBA Inspector General (IG). For the last three years, the IG has urged the SBA to adopt annual certification of small business size status in order to prevent large businesses from obtaining federal small business contracts. The IG has identified this as "one of the most important challenges facing the Small Business Administration and the entire federal government today." (Report 5-15, February 2005)

Angela Styles, former head of the Office of Federal Procurement Policy (OFPP), originally proposed annual certification in 2003 after this problem was exposed in a Government Accountability Office investigation. Ms. Styles insisted that annual certification was necessary to close the loopholes that allow government agencies to report contracts to large businesses as small business awards. However, the SBA stalled on adopting the rule and, according to Tiefer, has "simply ducked action for even partially closing those loopholes."

In closing his opinion, Professor Tiefer pointed out that, "One would think that the [SBA] would be in the business of helping small businesses . . . But this most recently published rule shows the SBA will let small business be squeezed out."

About the ASBL

The ASBL is founded on the principle that small businesses, the backbone of a vital American economy, should receive the fair treatment promised by the Small Business Act of 1953. See www.asbl.com.

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